M/S Asian Entertainments,, Hyderabad vs Department Of Income Tax

Asst. Commissioner of Income- vs. M/s Asian Entertainments, tax, Circle - 13(1), Hyderabad. Secunderabad.

PAN - AAKFA 0788K

(Appellant) (Respondent)

Revenue by : Shri B. Rajaram Assessee by : Shri P. Murali Mohan Rao

Date of hearing 23-06-2015 Date of pronouncement 26-06-2015

O RDE R PER SAKTIJIT DEY:

This appeal of the department is directed against order dated 31/12/2013 of ld. CIT(A)-V, Hyderabad pertaining to AY 2006-07.

2. The only effectively ground raised by the department is as follows:

"2. The CIT(A) erred in cancelling the order passed u/s 154 of the IT Act even though there was a mistake apparent from record."

4. Briefly the facts relating to this issue are, assessee a company filed its return of income for the impugned AY on 07/09/2006 declaring total income at Nil after set off of brought forward losses. Assessment in case of assessee was completed vide order passed u/s 143(3) of the Act allowing set off of brought forward losses from the earlier years. Subsequently, AO being of the view that there is a mistake in the order passed on 19/12/208 u/s 143(3) while allowing brought forward losses of AY 2005-06 amounting to Rs. 92,85,891, 2 ITA No. 768 /Hyd/2014 M/s Asian Entertainments

issued a notice u/s 154 of the Act to rectify the mistake in the assessment order. As observed by AO, in spite of such notice since no one appeared on behalf of assessee and submitted any explanation, AO presuming that assessee has no objection to rectify the mistake, passed order u/s 154 of the Act on 20/12/2012 by disallowing the brought forward loss of Rs. 92,85,891, which resulted in determination of total income at Rs. 92,85,891. Being aggrieved of the order passed u/s 154 of the Act, assessee preferred appeal before ld. CIT(A).

5. In course of hearing of appeal before ld. CIT(A), assessee challenging the jurisdiction of AO to invoke power u/s 154 of the Act made elaborate submissions by taking support from a number of judicial precedents. Ld. CIT(A) after considering the submissions of assessee in the light of the principle laid down in the judicial precedents relied on by assessee, held the order passed u/s 154 of the Act to be invalid and accordingly cancelled the same. Ld. CIT(A) observed that the mistake pointed by AO cannot be considered as a mistake apparent from record as it is a debatable issue on which more than one opinion are possible.

6. We have considered the submissions of the parties and perused the materials on record as well as the orders of revenue authorities on this issue. As can be seen from the facts on record, in the return filed for the AY 2005-06, assessee quantified loss to be carried forward at Rs. 1,83,07,041. The return filed by assessee for the AY 2005-06 on 01/11/2006 was processed u/s 143(1) and the loss quantified was allowed to be carried forward. In the return of income filed for AY 2006-07 assessee set off brought forward loss of Rs. 92,85,891 and declared the income at nil. In fact, assessment was also completed u/s 143(3) of the Act after allowing set off of brought forward loss. Subsequently, on finding that assessee having filed the return of income for AY 2005-06 after due date as prescribed u/s 139(1) of the Act, hence, no loss can be carried forward, AO initiated 3 ITA No. 768 /Hyd/2014 M/s Asian Entertainments

proceeding u/s 154 of the Act and ultimately passed the order disallowing the set off of brought forward loss of Rs. 92,85,891. In our view exercise of power u/s 154 of the Act in the present case is totally invalid. As can be seen, the loss of Rs. 92,85,891 was quantified and allowed to be carried forward while processing return filed by assessee u/s 143(1) of the Act for AY 2005-06. However, the loss and depreciation involved was not verifiable. Therefore, if at all there is a mistake, then, it is in the quantification and carry forward of loss in AY 2005-06 because of the fact that loss could not have been carried forward due to delayed filing of return of income. However, once loss was quantified and allowed to be carried forward in AY 2005-06, we are not able to understand how it can be rectified in AY 2006-07 wherein the brought forward loss has only been set off. Therefore, there being no mistake apparent on record in the assessment order passed for the impugned AY, exercise of power u/s 154 of the Act is invalid. Accordingly, there being no infirmity in the order of ld. CIT(A), we uphold the same by dismissing ground raised.

7. In the result, appeal of department is dismissed.

Pronounced in the open court on 26 th June, 2015.

Sd/- Sd/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 26 th June, 2015 kv Copy to:-

1) ACIT, Circle - 13(1), 2 n d Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.

2) M/s Asian Entertainments, 396/397, Jain Estate, Park Lane, Secunderabad.

3 CIT(A)-V, Hyderabad

4) CIT-I, Hyderabad

5) The Departmental Representative, I.T.A.T., Hyderabad.